Deck 16 Flashcards
Depreciable basis is:
Cost associated with the purchase of the asset and with getting the asset ready for its intending use
Definition of real property
land and all items permanently affixed to the land (e.g., buildings, paving, etc.)
Capital assets:
Property (real and personal) held by a taxpayer for investment
“Like-kind” exchange
Same type of investment; exchange of property used in the trade or business or held for investment (exception of inventory, stock, securities, real property)
Gain recognized is the lessor of:
Boot received or gain realized
Amount realized for property with no boot =
FMV of new property - adjusted basis
Amount realized for property with boot paid =
FMV of new property - boot - adjusted basis
New basis of like-kind property with boot received =
Adjusted basis of old property + gain recognized - boot received
Amount realized for property with boot received =
FMV of new property + boot - adjusted basis
What is the basis for inherited property?
FMV on the date of death
Section 1231 Assets
Depreciable assets and all real property used in a trade or business and held over 12 months
Gross profit percentage =
Gain (GP)/selling price
Real property
land and building
Personal property
machinery, equipment, and cars
Basic formula for determine gain or loss =
Amount received (amount realized) - adjusted basis of asset sold
Adjusted basis of asset sold (three kinds)
- Purchased property
- Gifted property
- Inherited property
Adjusted basis for purchased property
Cost of the property
Adjusted basis for gifted property
NBV/rolleover cost; Exception: if you sell for higher then use donor’s basis to determine gain, if you sell for lower then use lower FMV at date of gift, if you sell between, no gain or loss
A gain is not taxed if the taxpayer can “HIDE IT”
H: homeowners; I: Involuntary conversion; D: Divorce property settlement; E: Exchange of like kind; I: installment sale; T: treasury capital & stock
Homeowners exclusion =
$250,000 for single; $500,000 for married filing jointly
